Higher Education: Australian fees system wins British support: Vice-chancellors are exploring a graduate tax to fund university expansion, says Elizabeth Heron

THE IDEA of making more students pay their own tuition fees as a way to fund university expansion won strong, if unwitting, support from university vice-chancellors at a recent conference of the Higher Education Funding Council England.

During a question and answer session John Patten, the Secretary of State for Education, held a straw poll in response to a question put to him by Dr John Ashworth, director of the London School of Economics, about the Higher Education Contribution Scheme (HECS), an Australian system of financing higher education. Dr Ashworth asked the minister what lessons Britain could learn from the Australian experience.

In reply, Mr Patten asked how many vice-chancellors were in favour of staying with the present loans system; how many favoured moving to a similar system to that used in Australia, and how many were undecided.

More than 100 hands were raised in favour of the Australian model; there were no votes for the present system, and only a few abstentions. An astonished Mr Patten told the meeting he would think about the result.

HECS is a system of student fees supported by a tax on graduate earnings. It makes up 20 per cent of the cost of funding higher education in Australia.

The scheme is being studied by the Committee of Vice-Chancellors and Principals as part of its review of student funding. However, after the meeting it became clear that many vice-chancellors were unsure what scheme they had voted for.

Dr Ashworth accepted that the vote had been a 'tremendous muddle'. 'I asked two different things, and (student) maintenance, loans and fees were never disentangled,' he said.

'Quite a lot of people were confused and didn't know what they were voting for,' said another vice- chancellor. A few thought they had voted for a graduate tax to finance student maintenance loans.

HECS, introduced in 1989 by Bob Hawke's Labor government in the face of violent student protests, has been hailed as evidence that tuition fees offer a viable way of expanding higher education and do not act as a deterrent to students from disadvantaged groups.

This year about 4.4 billion Australian dollars ( pounds 2.1bn) will be provided through the scheme for higher education in Australia. Student enrolments have grown by almost 25 per cent since the scheme's inception, with about 85,000 extra places created since 1988.

Under HECS the same tuition fee - which this year stands at Adollars 2,328 ( pounds 1,100) - is charged to all full-time students regardless of their degree, with reductions for part-time students.

Those who can afford to pay upfront are offered a discount, which this year increased to 25 per cent, from the original 15 per cent. Those who cannot or do not wish to pay the fee while they are studying can defer until they have entered employment and are earning a salary above the index-linked minimum threshold.

Repayments are related to income. This year graduates have to start repaying 2 per cent of their earnings in additional tax when their salaries reach Adollars 27,748 or just less than pounds 13,100 (the average graduate starting salary is about pounds 9,500). Higher earnings trigger higher tax bands of up to 4 per cent, while graduates whose income never reaches the minimum threshold will escape the tax.

There is no time limit on repayments, but the debt increases each year in line with inflation. Payments continue until the debt is paid off, although remission is considered in special circumstances such as illness, and graduates who can demonstrate potential severe financial hardship are allowed to postpone their repayments.

HECS is administered by the universities, and deferred payments are handled by the Australian Taxation Office. Upfront fees are retained by the universities to cover their administration costs and deferred payments are placed in a trust fund reserved exclusively for university funding.

The Australian government says the scheme has achieved its aim of expanding student numbers and improving facilities. But the government has already reneged on undertakings made when the scheme was introduced, alarming both universities and student unions. Last year the annual increase in the HECS repayment was Adollars 144 ( pounds 68) above the retail price index, breaking the pledge that payments would rise only in line with inflation.

With the Labor Party having abandoned its own longstanding platform of 'free education as a right' by bringing in HECS, dissent is limited to the Australian National Union of Students and a handful of academics with specific criticisms.

The union has lodged a High Court appeal against the scheme. It argues that the discount included in the upfront payment option favours well-off students and that the HECS is a 'middle-ranking' concern for lower-income students considering higher education. However, there is no evidence of a significant withdrawal of such students. The union also wants a time limit on repayments and exemptions from fees for part-time students until they have finished their courses.

However, Mr Patten is likely to have an easier ride if he acts on the English vice-chancellors' 'advice'. Since the Government introduced the student loans scheme in 1990, their committee has been calling for a graduate tax comprised of both a tuition fee and maintenance element; and it is preparing a range of detailed feasibility studies.

Support for such a move has been fuelled this year by a Higher Education Funding Council England decision to cut tuition fees for classroom-based subjects by 30 per cent and freeze fees for laboratory-based subjects. Nor is the consumer-conscious National Union of Students likely to offer much resistance. It is also reviewing its policy on student finance, including tuition fees.